INTERNATIONAL TRADE AND ECONOMIC LAW AND THE EUROPEAN UNION International Trade and Economic Law and the European Union SARA DILLON PhD (Stanford), J.D (Columbia), Associate Professor of Law, Suffolk University Law School, Boston, Mass OXFORD – PORTLAND, OREGON 2002 Hart Publishing Oxford and Portland, Oregon Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 5804 NE Hassalo Street Portland, Oregon 97213-3644 USA Distributed in the Netherlands, Belgium and Luxembourg by Intersentia, Churchillaan 108 B2900 Schoten Antwerpen Belgium © Sara Dillon 2002 The author has asserted her right under the Copyright, Designs and Patents Act 1988, to be identified as the author of this work Hart Publishing is a specialist legal publisher based in Oxford, England To order further copies of this book or to request a list of other publications please write to: Hart Publishing, Salter’s Boatyard, Folly Bridge, Abingdon Road, Oxford OX1 4LB Telephone: +44 (0)1865 245533 or Fax: +44 (0)1865 794882 e-mail: mail@hartpub.co.uk WEBSITE: http//www.hartpub.co.uk British Library Cataloguing in Publication Data Data Available ISBN 1–84113–113–X (paperback) Typeset by Hope Services (Abingdon) Ltd Printed and bound in Great Britain on acid-free paper by Biddles Ltd, www.biddles.co.uk Foreword With the accession of China, and the successful launch at Doha of a new round of international trade negotiations (however fraught with contradictions the opening ministerial declaration), it would seem that the World Trade Organisation (WTO) is here to stay Whatever doubts there may have been after the Seattle Ministerial debacle of late 1999 with respect to the long-term viability of WTO law have apparently been put to rest after the events of September 11, 2001 At moments of global crisis, economic integration re-emerges as a symbol of stability The more difficult question, however, is what form this economic integration should take With the anti-globalisation movement in a state of some confusion in the wake of September’s events, the WTO’s Doha conference moved forward, and an uneasy basis for future action agreed upon It would be folly, however, to imagine that the intellectual difficulties presented by WTO law—with its unsettling relationship to national regulatory goals—have also disappeared As trade negotiations proceed under the new round in the months to come, there will be an urgent need for far greater numbers of people than heretofore to involve themselves in shaping global trade law The outcome of the new round should be, and hopefully will be, the result of more complex intellectual and political inputs than was the case with the Uruguay Round Agreements, the substantive law of which came into force in 1995, generating controversy and street conflict in the years that followed The Doha Ministerial Declaration reflects in places the variegated protests that hounded trade meetings in the late 1990s wherever they occurred, prominently mentioning the special difficulties of developing countries, trade and environment concerns, and the matter of an improved “dialogue with the public”.1 There are indications of a general commitment to further liberalisation in the areas of agriculture, investments, and trade in services; also to taking up the issue of a “multilateral framework to enhance the contribution of competition policy to international trade and development” Commentators are already making predictions as to where the concessions and climb-downs will come from; will the EU hold firm on agriculture? Will the developing countries give in on the introduction into WTO law of new subject areas? There are also signs that the most high-profile of the contentious WTO issues will be addressed in the spirit of preserving the WTO as a whole; notably, the fact that a separate Declaration on the TRIPS Agreement and Public Health calls for an interpretation of the Agreement on Trade-Related Aspects of Ministerial Declaration, WT/MIN(01)/DEC/1, 20 November 2001 vi Foreword Intellectual Property (TRIPS) to allow for the granting of compulsory licenses for patented drugs in the event of national public health emergencies.2 There is little question but that many WTO insiders would like to move on from this persistent controversy, which has had the effect of characterising the entire WTO as harsh and unfair in the public mind It is unclear at this juncture the degree to which the issues around which antiglobalisation protests have taken place over the last several years will be reflected in the actual WTO negotiating agenda as it takes shape in the near future To the extent that the interests of developing countries (not to mention disparate groups within those countries), environmental activists, labor advocates, and anti-debt campaigners pursue very different, and sometimes conflicting, agendas, the possibility of fundamental reform of the global trade regime is correspondingly lessened This book suggests that the EU model of economic integration offers a far more fruitful and complex human endeavour than what has been seen from the WTO thus far But as we enter the new negotiating round, it is important to consider that the ultimate shape of WTO law is still to be determined What GATT/WTO law has undertaken so far—including its purposes, methods and achievements—is the principal subject of this book I would like to offer sincere thanks to Richard Hart of Hart Publishing, to friends and colleagues at University College Dublin, Brooklyn Law School, and Suffolk University Law School Special mention and gratitude go to my research assistant extraordinaire, Mr Marc Monte, 2001 graduate of Brooklyn Law School; thanks also to Ms Anne Gates-Gurski of Suffolk University Law School WT/MIN(01)/DEC/2, 20 November 2001 Contents Table of Cases xiii PART I GLOBAL CONTEXT Introduction: The Problem of Europe in a Globalised World “Trade Rights as European Rights” Methodologies of Integration: The EC and the WTO EU identity in the development of global governance How this book should be read Structure and purpose of the book Focus on the disputes Early GATT 10 14 19 21 22 25 Other GATT provisions of particular importance GATT over time The intervening decades The earliest GATT disputes: nullification or impairment of GATT “benefit” Anti-legalism and the tumultuous 1960s The age of the Tokyo Round: new areas of concern reflected in stand-alone codes GATT’s adolescence: the DISC case Anticipating the Uruguay Round The Dispute Settlement Understanding Institutional basis: the WTO itself New areas of GATT/WTO law: Trade post-1995 PART II 33 38 39 42 49 49 52 53 56 58 59 THE EFFECTS OF THE URUGUAY ROUND Intellectual Property Rights and Trade: Creating the TRIPS Agreement Intellectual property and the old GATT The coming of TRIPS Indian Pharmaceuticals 63 64 67 71 viii Contents Canadian generic drugs Canadian term of patent protection The US “Fairness in Music Licensing” Act “Free Trade in Investments” The FIRA case International instruments to protect investments before the adoption of the TRIMS Agreement Bilateral Investment Treaties (BITs) and Bilateral Investment Protection Agreements (BIPAs) The OECD and investments Multilateral liberalisation of investment regimes: the TRIMs Agreement Export Subsidies Law dovetails with TRIMs Investing in Indonesia’s Automobile Industry Claims of MFN violations Claims of serious prejudice under the Subsidies Agreement TRIPs arguments The Canadian Automotive Industry The Multilateral Agreement on Investments (MAI) “Trade and the Environment”: International trade rules and national regulation of the environment Pre-Uruguay Round Tuna-Dolphin The Thai Cigarettes case Trade and the environment, post-Uruguay Round The Agreement on Technical Barriers to Trade (TBT Agreement) The “Beef Hormones” dispute The Sea Turtle case United States—import prohibition of certain shrimp and shrimp products The Canadian Salmon case The Asbestos case: how real is the change of emphasis? The Appellate Body and the asbestos dispute Conclusion The trouble with Trade in Agriculture Pre-Uruguay Round Agriculture enters the global free trade system Canada’s “export subsidies” The Millennium Round on agriculture Submissions of WTO members at the outset of the new round 79 82 84 93 94 96 97 99 101 103 106 111 111 113 114 116 119 122 122 126 128 130 131 141 148 153 157 166 173 175 177 179 182 188 189 Contents ix Safeguards: Escape clauses and the power of self-protection The Uruguay Round Agreement on safeguards: new rules for invoking Article XIX Disputes under the Safeguard Agreement Korean Skimmed Milk Powder The Appellate Body on Korean Dairy Safeguards Argentine Footwear Safeguards Argentine Footwear and the Appellate Body US Safeguards on Wheat Gluten The Appellate Body and causality US measures on imports of lamb meat Safeguards disputes seen in the aggregate Liberalising the Textile trade: The only Uruguay Round Agreement of clear benefit to the Developing World? Structure and content of the agreement on textiles and clothing Litigation under the ATC The requirements of joining an Advanced customs union: India v Turkey 197 200 203 203 208 210 213 213 220 224 228 229 231 234 240 The Power of the General Agreement on Trade in Services (GATS) 251 The General Agreement on Trade in Services (GATS) GATS at work: The Banana dispute Outline of the 1993 European Banana Regime The Banana panel on the substantive issues arising in the case The Lomé waiver Agriculture Agreement issues Licensing procedures challenged under GATT The GATS issues The EC Banana Regime and the Appellate Body Fuji-Kodak: A special role for the Services Agreement? Canadian Automotive Industry case GATS, the import duty exemption, and the Appellate Body The future of GATS 252 257 259 262 263 264 264 265 267 269 272 275 279 10 National measures against dumping and subsidies 283 Anti-dumping actions: the last of the (somewhat) low-cost protectionist devices? 283 Pre-1995 actions: Japan’s anti-dumping complaint The development of European anti-dumping legislation Community anti-dumping law and the problem of circumvention 285 287 288 x Contents The Uruguay Round Agreement on the implementation of Article VI (anti-dumping) WTO anti-dumping disputes Korea v US: Anti-dumping duty on Dynamic Random Access Memory Semiconductors (DRAMS) Challenging US anti-dumping legislation Future Development of WTO Anti-Dumping Law The Scope of WTO Subsidies Law: recent disputes under the SCM Agreement National Tax Law as an export subsidy: the DISC case revisited Subsidies to the Aircraft Industry Disciplining Anti-Dumping, Anti-Subsidies and Subsidies PART III 290 294 294 298 303 303 304 310 316 EXTERNAL TRADE RELATIONS OF THE EUROPEAN UNION 11 European External Trade Relations: Uniformity Without Building blocks of the Common Commercial Policy Rules of origin External charges equivalent to customs duties Community competence to conclude and participate in International Agreements Exclusive competence in matters falling under the CCP: the nature of exclusivity Opinion 1/78 (The Natural Rubber Agreement) External agreements on non-CCP subject matter: How does the Community gain competence? The ERTA case: parallelism and external competence Inland Waterways opinion: a stronger parallelism An expanding definition of the Common Commercial Policy The new Commercial Policy instrument and the Trade Barriers instrument The original regulation The Community’s monopoly to interpret GATT commitments Trade safeguards for the EC Member States: a rare and narrow opt out National freedom to restrict exports? Two views of a segmented market Opinion 1/94: A retreat from absolute uniformity? 12 The European Court of Justice meets GATT Law: The Power of First Impressions The Court and the GATT Agreement The Court of Justice and other Free Trade Agreements 319 319 321 324 325 326 328 329 329 331 332 334 334 337 338 341 342 344 355 357 361 378 The European Court of Justice Meets GATT Law The regulation has a larger purpose, which the Court found justified the differences in treatment identified “The Regulation”, the Court continued, “is intended to ensure the disposal of Community production and traditional ACP production, which entails the striking of a balance between the two categories of economic operators in question”.57 Germany was unable to rely on GATT law to protect the trading rights and interests of its national traders, even though they were clearly disadvantaged by the operation of the 1993 banana regulation GATT law will not be allowed to trump the Community interest Rights and obligations will be balanced according to Community concerns, which are more complex than those enshrined in the GATT The Member States may not use the text of the General Agreement as a kind of economic constitution, though Germany made an extremely compelling attempt to just that PORTUGUESE REPUBLIC V COUNCIL OF THE EUROPEAN UNION 58 There was a sense, after the changes that occurred at WTO level after the conclusion of the Uruguay Round, that the reasoning of International Fruit, which had served as a precarious basis for the Court of Justice to refuse GATT law direct effect within the Community legal order, would not endure After all, the Court had long relied on the dubious but ostensibly appropriate conclusion that GATT law lacked clear and binding requirements and dispute settlement procedures; it was, in the Court’s long-held view, incapable of conferring rights upon individuals, nor even upon Member States, within the Community, on the basis of which they could challenge inconsistent Community law provisions The Court’s true reasons for denying direct effect were doubtless more complex than those stated; the subtext for International Fruit and cases following has been outlined in the introductory chapter to this work However, with the ease and convenience of the facially irrefutable, the Court continued, even in Germany v Council, to rely upon the well-worn phrases of International Fruit in order to fend off attacks by GATT principle on Community laws that could be seen as conflicting with the international trade rules Until the creation of the WTO in 1995, and the coming into effect of the Uruguay Round Agreements, there was no mechanism by which to test the limits of the International Fruit “reasoning”, or to push the Court into either allowing direct effect to GATT/WTO law—highly unlikely as has been suggested—or at last providing a more satisfying set of reasons Not surprisingly, just such a case arose not long after the coming into force of WTO law In May of 1996, Portugal brought an action under Article 230 (ex Article 173) of the Treaty, seeking the annulment of a Council decision concerning the conclusion 57 58 Paras 73–74 Portuguese Republic v Council, Case C–149/96, [1999] ECR I–8395 Portuguese Republic v Council of the European Union 379 of Memoranda of Understanding between the European Community and the Islamic Republic of Pakistan and between the European Community and the Republic of India on arrangements in the area of market access for textile products.59 As factual background, the Uruguay Round negotiations came to an end in December 1993, after which the Director General of GATT invited some of the participants to “pursue their negotiations on access to the market, with a view to reaching a more complete and better balanced market access package”.60 Negotiations on market access for textile products between the Community and India and Pakistan were pursued by the Commission, with the assistance of a “textile committee” designated by the Council In April of 1994, despite the fact that the negotiations on market access in textiles were not yet completed with Pakistan and India, the President of the Council and the Commission member with responsibility for external relations signed the Final Act concluding the multilateral trade agreements of the Uruguay Round, the WTO Agreement and all its annexed agreements on behalf of the EU These included the Agreement on Textiles and Clothing (ATC) and the Agreement on Import Licensing Procedures.61 In late 1994, the Commission, and Pakistan and India, signed two Memoranda of Understanding between the European Community and India and Pakistan on arrangements in the area of market access for textile products.62 Under the Memorandum of Understanding with Pakistan, Pakistan agreed to eliminate all QRs applicable to textile products listed in Annex II to the Memorandum The Commission undertook to “give favourable consideration to requests which the government of Pakistan might introduce in respect of the management of existing [tariff] restrictions for exceptional flexibility and to initiate immediately the necessary internal procedures in order to ensure ‘that all restrictions currently affecting the importation of products off the handloom and cottage industries of Pakistan are removed before entry into force of the WTO’ ”.63 The Memorandum between India and the Community stated that the Indian government was to bind the tariff it applied to textile and clothing items listed in an attachment, and that these would be notified to the WTO secretariat within 60 days of the date of entry into force of the WTO It also provided that India could introduce alternative specific duties for particular products For its part, the EC agreed to “remove with effect from January 1995 all restrictions currently applicable to India’s exports of handloom products and cottage industry products; and also to give favourable consideration to “exceptional flexibilities” for any and all categories under restraint, up to amounts indicated in the memorandum for 1995 through 2004.64 59 60 61 62 63 64 See Council Decision 96/386/EC of 26 February 1996, OJ 1996 L 153, p 47 Judgment Para Judgment Paras 5–6 Ibid Para 10 Ibid Para 10 Ibid Para 11 380 The European Court of Justice Meets GATT Law The content of the memoranda was approved in the contested Council decision of February 1996 Approval was by qualified majority, with Spain, Greece and Portugal voting against it Community legislation lays down rules for imports into the Community of textile products originating in third countries which are linked to the Community by agreements, protocols or arrangements, or which are members of the WTO.65 Article 2(1) of the Community regulation stated that the importation of textile products listed in Annex V originating in enumerated countries were to be subject to annual quantitative limits set down in the annex The release for free circulation into the Community of imports subject to the Annex V limits was to be subject to the presentation of an import authorisation issued by the Member States’ authorities.66 Article 3(1) of the regulation specified that the limits referred to in Annex V did not apply to specified cottage industry and folklore products, which had to be accompanied by a certificate meeting separate conditions.67 In April of 1995, a Council Regulation granted financial assistance to Portugal for the purpose of modernising its textile and clothing industries In December 1995, a Commission Regulation amended the annexes of the principal regulation on textile trade, to reflect the arrangement with India concerning the abolition of restrictions on market access for certain folklore and cottage industry products originating in India.68 While the original Commission regulation reflecting the agreements was made invalid because of a procedural defect, a later regulation was created to fulfil the same purpose Portugal’s challenge to the decision concluding the memoranda of understanding was based first on the argument that it had breached rules and fundamental principals of WTO law; and second that it had breached rules and fundamental principles of the Community legal order.69 With regard to WTO law, Portugal relied on GATT 1994, the ATC and the Agreement on Import Licensing Procedures.70 Portugal attempted to distinguish the situation at hand from that of Germany v Council, in that while GATT was confirmed not to have direct effect in that case, the Court of Justice also held that “that does not apply where the adoption of the measures implementing obligations assumed within the context of the GATT is in issue or where a Community measure refers expressly to specific provisions of the General Agreement” Portugal argued that the Court had stated in paragraph 111 of the Germany v Council judgment that in such a case, the Court must review the legality of the Community measure in the light of the relevant GATT rules Here, Portugal maintained, that is in fact the case, since the decision in question reflected an 65 Para 15 See Council Regulation (EEC) No 3030/93 of 12 October 1993 on common rules for imports of certain textile products from third countries, as amended by Council Regulation (EC) No 3289/94 of 22 December 1994 66 Para 17 67 Para 18 68 Paras 19–20 69 Para 24 70 Para 25 Portuguese Republic v Council of the European Union 381 understanding negotiated “for the specific purpose of applying the rules in GATT 1994 and the ATC”.71 The counter-argument proposed by the Council, the Commission and the French government was that the decision was not a “Community measure” intended “to transpose certain provisions of the ATC into Community law” The Portuguese government made the important argument, the argument “waiting to happen”, that GATT 1947 was not at issue in this case; rather, that GATT 1994 and WTO agreements were the focus, these being significantly different from GATT 1947, “in particular in so far as they radically alter the dispute settlement procedure”.72 As Germany had also argued in the earlier case, Portugal insisted that the issue was not direct effect; rather, it concerned “the circumstances in which a Member State may rely on the WTO agreements before the Court for the purpose of reviewing the legality of a Council measure”.73 As to the WTO question, the Court stated that while it is true that the WTO agreements differ significantly from the provisions of GATT 1947, “the system resulting from those agreements nevertheless accords considerable importance to negotiation between the parties”.74 Examining the structure of the DSU, the Court wrote that although the main purpose is to secure the withdrawal of measures found to be inconsistent with WTO rules, the DSU also provides that “where immediate withdrawal of the measures is impracticable, compensation may be granted on an interim basis pending the withdrawal of the inconsistent measure”.75 The Court noted that where compliance is not forthcoming within a reasonable period of time, the DSU allows for negotiations between the parties with a view to finding mutually acceptable compensation.76 The Court concluded from this that “to require the judicial organs to refrain from applying the rules of domestic law which are inconsistent with the WTO agreements would have the consequence of depriving the legislative or executive organs of the contracting parties of the possibility afforded by Article 22 of that memorandum of entering into negotiated arrangements even on a temporary basis”.77 While not stated in the clearest possible manner, the Court here has decided to emphasise the freedom of WTO members to negotiate alternative modes of dispute settlement; and not the fact that there is now the possibility of a binding decision regarding the WTO-illegality of the domestic law Offering compensation, 71 Para 28 Para., 31 73 Para 32 The Court wrote that “The Portuguese Government maintains that such a review is justified in the case of measures such as the contested decision which approve bilateral agreements governing, in relations between the Community and non-member countries, matters to which the WTO rules apply.” Para 33 74 Para 36 75 Para 37 76 Paras 38–39 77 Para 40 72 382 The European Court of Justice Meets GATT Law which is essentially compliance with a penalty, does not thereby make the GATT/WTO-illegal measure GATT-legal The Court pointed out that some of the Community’s principal trading partners have concluded that the WTO agreements are not “among the rules applicable by their judicial organs when reviewing the legality of their rules in domestic law” The Court is of course well aware that the United States implementing legislation explicitly rejected the idea of direct effect within the US legal order for the Uruguay Round Agreements.78 While this does not in itself constitute a “lack of reciprocity” in the implementation of the agreements, the Court noted that the WTO agreements are based on “reciprocal and mutually advantageous arrangements”, and must be distinguished from agreements concluded between the Community and third parties, such as the Court had interpreted in the Kupferberg case.79 In the WTO context, such lack of reciprocity could lead to “disuniform application of the WTO rules”, according to the Court.80 While overtly political, the Court at least provides a more honest appraisal of why it cannot grant such effect to WTO law within the Community legal order when it writes that “To accept that the role of ensuring that those rules comply with Community law devolves directly on the Community judicature would deprive the legislature or executive organs of the Community of the scope for manoeuvre enjoyed by their counterparts in the Community’s trading partners”.81 More generally, the Court displayed its traditional disinclination to allow the Community legislature’s freedom to be restricted by reference to GATT law The Court concluded that “having regard to their nature and structure, the WTO agreements are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutions”.82 Reverting to the Fediol and Nakajima holdings, the Court stated that “it is only where the Community intended to implement a particular obligation assumed in the context of the WTO, or where the Community measure refers expressly to the precise provisions of the WTO agreements, that it is for the Court to review the legality of the Community measure in question in the light of the WTO rules”.83 78 Para 43 Para 45 80 Para 45 81 Para 46 82 Para 47 The Court further noted at para 48 that Decision 94/800, on the adoption of the WTO agreements, stated that “by its nature, the Agreement establishing the World Trade Organization, including the Annexes thereto, is not susceptible to being directly invoked in Community or Member State courts” (It should, however, be pointed out that this statement found in such a decision rather begs the question.) The Court here differed from the position of the Advocate General in this case, who concluded that Portugal should be able to rely on WTO law, since unlike GATT 1947, the WTO agreements contained a binding, rule-based system See Opinion of Advocate General Antonio Saggio, 25 February 1999 83 Para 49 79 Portuguese Republic v Council of the European Union 383 And the Court held that this was not the situation in this case, since “the contested decision is not designed to ensure the implementation in the Community legal order of a particular obligation assumed in the context of the WTO, nor does it make express reference to any specific provisions of the WTO agreements” Rather, “its purpose is merely to approve the Memoranda of Understanding negotiated by the Community with Pakistan and India”.84 Portugal made a number of interesting, though unsuccessful, arguments to the effect that rules and fundamental principles of the Community legal order had also been breached The most relevant of these was the allegation of a breach of the principle of legitimate expectations, as regarded “economic operators in the Portuguese textile industry”.85 In particular, Portugal argued that its textile industry was “entitled to expect that the Council would not substantially alter the timetable and rate of the opening of the Community market in textile products to international competition, as fixed in the WTO Agreements, particularly in the ATC, and in the applicable Community legislation [transposing] the rules set out in the ATC into Community law”.86 The Court noted Portugal’s view that the adoption of the decision in question did create significant acceleration of the process of liberalising the Community market, and thus altered the framework set up under the ATC That alteration did cause harm to the Portuguese textile operators.87 The Court dismissed Portugal’s arguments since it was “settled law that the principle of respect for legitimate expectations cannot be used to make a regulation unalterable, in particular in sectors—such as that of textile imports—where continuous adjustment of the rules to changes in the economic situation is necessary and therefore reasonably foreseeable”.88 As with International Fruit, there are logical inconsistencies in the Court’s position on the effect in the Community legal order of WTO law.89 The Court did not really examine the specific nature and provisions of WTO law, and did not fully analyse how it differed from the earlier GATT system it replaced As it did in International Fruit, the Court in Portugal v Council focused on only one aspect of the WTO regime, taking it out of context, and thus reducing the scope of WTO law with which it would have to contend for purposes of deflecting yet another attempt to submit Community law to GATT legality.90 But 84 Para 51 Para 69 86 Para 70 87 Para 71 88 Para 75 89 See Patricia Egli and Juliane Kokott, “International Decision: Portuguese Republic v Council of the European Union”, 94 American Journal of International Law 740 (2000) 90 For an analysis of the similarity of approach taken by the Court in these cases, see Geert Zonnekeyn, “The Status of the WTO Agreements in the EC Legal Order After the Portuguese Textiles Case”, (May 2000) 6:2 International Trade Law and Regulation (London), 42–47 85 384 The European Court of Justice Meets GATT Law while commentators have waited for the outcome of this case, believing that the Court would be unable to continue the line of reasoning commenced in International Fruit, in one sense the Court had even less reason after 1995 to subject Community acts to the discipline of GATT/WTO legality As has been pointed out many times, the difference between the GATT and other international agreements entered into by the Community was not so much in structure or even content; hence the accusations of inconsistency in the Court’s approach to GATT law Rather, the GATT was unique in its broad multilateralism, its unpredictable outcomes, and its potential to invalidate domestic law While the Court was satisfied to dismiss the GATT for purposes of direct effect in that it was structurally incapable of providing direct effect, due to its negotiation-based character, in fact it was the Community’s lack of control over GATT outcomes that was undoubtedly at the root of the Court’s reluctance It is impossible to imagine another international trade agreement that could so threaten the regulatory discretion of the Community legislative mechanism; and also impossible to conceive of another international agreement that could provide so many causes of action within which to challenge Community legislation in unexpected and creative ways Yet because the Court chose the particular emphasis it did in International Fruit, it was expected that this rationale would have to give way in light of the developments of the Uruguay Round and the creation of the WTO However, a Court reluctant to grant such effect to GATT law could hardly be expected to “invite in” a creature as extensive as the WTO, with its numerous attendant agreements, capable of presenting challenges to countless Community legislative programmes In this light, the Court’s unwillingness to allow international harmonisation through the adoption of the Uruguay Round Agreements in Opinion 1/94, and its unwillingness to grant GATT/WTO law full effect in the Community legal order, starting with International Fruit and continuing through Portugal v Council, have much in common GATT/WTO law is not merely a set of international obligations, freely undertaken, falling only on the regulatory efficiency of the Community Rather, as has been discussed throughout this book, and demonstrated in the narrative discussion of numerous disputes, it is a unique kind of law, having open-ended implications, capable of interfering with legislative and regulatory programmes of the widest variety If the EU itself suffers from accusations of a democratic deficit, and a failure to honour many legitimate purposes of Member State law, for the EU to cede further control to GATT/WTO law by granting it the same status as other international commitments of the EU could lead to startling outcomes To allow direct effect of WTO law would, in effect, shift the WTO’s dispute resolution system to the EU itself, with the Court of Justice in effect taking the role of a panel It should also be noted that the issues raised in International Fruit were far simpler than those that would be bound to arise today, given the proliferation of causes of action under WTO law Portuguese Republic v Council of the European Union 385 Osterhoudt Berkey has made the important point that GATT law is probably not an appropriate source of “individual rights” in any event, in that the GATT is “ultimately an agreement regulating the rights and obligations of its members [and] not individuals”.91 It may be that advocating the direct application of GATT/WTO law within the Community legal order may simply be a way of expressing dissatisfaction with the EU’s own legislative ethos, a wish for the EU itself to orient itself as a political matter more in the direction of a globallyfocused efficiency There are economic rights within the European legal order, but they are circumscribed by other values that enjoy equal legal status within that order Granting direct effect to GATT/WTO law would privilege one set of Community concerns over another, and threaten the subject matter complexity discussed in chapter Kuilwijk has argued that “Certainly, granting direct effect to GATT would mean a shift of power within the Community from the executive to the judiciary branch However, such a shift of power would enhance both procedural and substantive rights of individuals in the Community and would help the political institutions to overcome the lobby pressures which lead them to violate the law to the detriment of the Community’s public interest” He continues: “Direct effect also would impede the Community’s ability to violate the law in a reaction to violations by other WTO Members It would force the Community to use the proper procedures under the GATT treaty In the view of the Council, this is too much to ask It therefore explicitly has excluded the direct effect of the WTO agreements It still is the Court of Justice, however, which has the final word on this matter”.92 While this is a compelling argument in favour of direct effect for GATT/WTO in the Community legal order, it also sets out precisely why direct effect is not possible Along with all other WTO members, the EU now has a clear penalty to pay in the event of non-compliance with an adverse WTO ruling However, the cumulative effect of these rulings will influence the EU in its approach to the future development of GATT/WTO law It is plain that the crisis of legitimacy so often discussed since the events of Seattle in late 1999 will not be easily answered The EU, as an alternative model of international economic, political and social integration, is in a unique position to assist in complexifying the future WTO, or in bringing other international agreements on other subjects up to the legal status currently enjoyed by the WTO alone 91 92 See above n Kuilwijk, above n at 345 Index ACP (African, Caribbean and Pacific) countries, 257–8 Agenda 2000 package, 188–9 Agreement on Textiles and Clothing, see ATC agriculture: exceptionalism, 175 Indian concerns, 192–3 multifunctional role, 189–91 oilseed case, 177–9 Agriculture Agreement, 54, 176, 179–82, 188, 195 Agenda 2000 package, 188–9 CAP (EU) and, 191–2 developing countries’ concerns, 192–3 Domestic Support Commitments, 180 Due Restraint, 181, 182, 191 EU position, 189–92, 194 export subsidies, 181, 182–9 long-term reduction of support and protection, 181–2 peace clause, 181, 182, 191 safeguard clause, 180, 188, 190 SPS and, 181 style of language, 179, 195 tariff reduction rules, 180 Total Aggregate Measurement of Support, 180–1 US position, 193–5 see also Banana dispute Ammonium Sulphate dispute, 42–4 anti-dumping, 33–34, 283–4, 316–17 circumvention of EU rules, 285–7, 288–9 DRAMS dispute, 294–8 EU legislation, 287–8 as protectionist device, 283–4 Tokyo Round code, 50, 284n , 286 US legislation, 298–303 Anti-Dumping Agreement, 284, 290–4 determination of injury, 290–1 and developing countries, 294, 303 evidence of causality, 292 imposition of duties, 293 termination of duties, 293–4 Appellate Body and panels, 140, 141, 157, 223, 263 Banana dispute, 267–9 contrasts in legal approach, 137–8, 187–8 and GATS, 272, 275–9 TRIPs Agreement and, 75–8 Application of Sanitary and Phytosanitary Measures, 54–5 Argentina, footwear safeguards, 210–13 Asbestos case, 157–73 French decree, 158–9 like products aspect, 162–3 nature of products, 163–73 and TBT, 159–62 ATC (Agreement on Textiles and Clothing), 55, 230, 231–4 and customs union requirements, 240–9 safeguards, 232–3 termination, 233–4 transition period, 231–2 see also India, imports of wool from; United States, underwear imports Australia: dispute with Canada, 153–7 dispute with Chile, 42–4 dispute with France, 46–7 dispute with US, 224–8 Banana dispute, 257–9, 375–6 Agriculture Agreement and, 264 Appellate Body decisions, 267–9 European Banana regime (1993), 259–63 GATS issues and, 265–7 licensing procedures and, 264–5 Lome waiver, 263–4 substantive issues, 262–3 Banana Framework Agreement (BFA), 260 Beef Hormones dispute, 131–41 BFA, see Banana Framework Agreement bilateral investment protection agreements, see BIPAs bilateral investment treaties, see BITs biodiversity, 90–1 BIPAS (bilateral investment protection agreements), 97–9 BITs (bilateral investment treaties), 97–9 Brazil: Civil Aircraft case, 310–16 dispute with United States, 88–9 Bretton Woods system, 26 Cairns Group, 176, 188–9 Canada: Asbestos case, 157–9 automotive industry, 114–16, 272–5 Civil Aircraft case, 310–16 388 Index Canada (cont.): FIRA (Foreign Investment Review Act) case, 94–96, 101 Milk case, 182–8 Salmon case, 153–7 US, Wheat Gluten safeguards and, 213–19 CAP (Common Agricultural Policy) (EU), 191–2, 194 Capital Movements Code (OECD), 100 CCP (Common Commercial Policy) (EU), 319–21 exclusive competence and, 326–7, 337–8, 344–54 expanding definition, 331–4 external charges equivalent to customs duties, 324 external competence and, 324–6, 328–9 GATS and, 345 generalised system of preferences (GSP) and, 343–4 Inland Waterways opinion, 330–1 internal partitioning of European market, 342–4 mixed agreement formula, 325, 327–8 national freedom to restrict exports, 341–2 natural rubber agreement, 326–7 parallelism, 329–30 rules of origin, 321–4 trade safeguards, members’ opt out, 338–41 TRIPS and, 345, 346 see also New Commercial Policy Instrument; Trade Barriers Instrument Chile, Ammonium Sulphate dispute, 42–4 CITES (Convention on International Trade in Endangered Species), 141n , 144–5 Codex Alimentarius Commission, 133–4, 137 Committee on Technical Barriers to Trade, 131 Common Commercial Policy (EU), see CCP comparative advantage, 28–9, 176 competition rules, 254 computer programs, 69 Contracting Parties (CP), 37 Convention on International Trade in Endangered Species, see CITES copyrights, 68–9 Costa Rica, dispute with US, 235–7 Cotonou Agreement, 14–17, 269 Council for Trade in Goods, 102–3 countervailing duties, 33–4 customs union requirements, 240–9 customs valuation , Tokyo Round code, 51 developed and developing countries: agricultural concerns, 192–3 free trade in investments, 93 TRIPS (Trade Related Aspects of Intellectual Property) Agreement, 67–8, 79, 88–92 developing countries: Agriculture Agreement concerns, 192–3 GATS and, 279–81 Safeguards Agreement and, 201–2 DISC (Domestic International Sales Corporation) case, 52–3, 304–10 disguised restrictions on trade, 150 dispute resolution, 68, 70–1, 98–9 see also DSB (Dispute Settlement Body); DSU (Dispute Settlement Understanding) Dispute Settlement Body, see DSB Dispute Settlement Understanding, see DSU Domestic International Sales Corporation, see DISC case DRAMS (Dynamic Random Access Memory Semiconductors), 294–5 DSB (Dispute Settlement Body), 56–8 DSU (Dispute Settlement Understanding), 56–8, 70–1, 102, 130, 131, 138, 145, 239 dumping, see anti-dumping Dynamic Random Access Memory Semiconductors, see DRAMS environment, and trade, 119–22, 173–4 disguised restrictions on trade, 150 harmonisation, 129–30 precautionary principle, 141 risk assessment, 130 Sea Turtle case, 141–7, 148–9, 151–3 Thai cigarettes case, 126–8 Tuna–Dolphin case, 122–6 Uruguay round and, 128–30 European Court of Justice: Association Agreements and, 365–7 and direct effect to GATT provisions, 355–7, 378–85 Fediol case, 372–5 free trade agreements and, 362–3 GATT law as EU law, 367–70, 372–5 GATT/WTO law against EU law, 370–2 International Fruit case, 358–61 Italy’s customs duties and, 357–8 Kupferberg case, 363–5 member’s interest s with GATT law, 375–8 Polydor case, 362–3 Schluter case, 367–8 Sevince case, 365–7 and Yaounde Convention, 361–2 exclusive marketing rights, 74–5, 78 export subsidies, 34, 181, 182–3 “fairness in music” licensing, 84–8 film rentals, 69 FIRA (Foreign Investment Review Act) case, 94–6, 101 Foreign Investment Review Act, see FIRA foreign sales corporations, see FSCs Index 389 France: Asbestos case, 157–9 dispute with Australia, 46–7 free trade in investments, 93 see also MAI freedom of international financial transfers, 254 FSCs (foreign sales corporations), 304–5, 308, 310 Fuji-Kodak case, 269–72 General Agreement on Tariffs and Trade, see GATT General Agreement on Trade in Services, see GATS generalised system of preferences, see GSP genetic engineering, 90–1 global governance, EU identity and, 14–19 government procurement, Tokyo Round code, 51 GSP (generalised system of preferences), 343–4 GATS (General Agreement on Trade in Services), 55, 251–6, 279–81 Canadian Automotive Industry case, 272–5 CCP and, 345 competition rules, 254 domestic regulation, 253–4 economic integration and, 253 financial services, 256 freedom of international financial transfers, 254 Fuji-Kodak case, 269–72 import duty exemption, 275–9 individual service-liberalising commitments, 255 MFN obligation, 253 negative commitments, 255–6 progressive liberalisation, 255 telecommunications, 256 GATT (General Agreement on Tariffs and Trade), 1, 31–2 agricultural products, 175 anti-dumping, 33–4 Contracting Parties (CP), 37 countervailing duties, 33–4 DISC case, 52–3 dispute procedures, 36–7, 38–9, 40–1, 42–9 emergency protective action, 35–6 and European Court of Justice, 355–7 export subsidies, 34 general exceptions, 36 and intellectual property pre-1995, 64–7 Kennedy Round, 39 legitimate expectations and, 37, 42 “most favoured nation” concept, 28, 32–3 nullification of benefit, 42–9 open-endedness, 25–6 panel rulings, 38–9 PPA (Protocol of Provision Application), 30–1 quantitative restrictions, 34–5, 198–9 safeguard arrangements, 198–9 separate codes, 31 Tokyo Rounds, 39–40 Uruguay Round Agreements, VERs and, 41 see also Banana dispute harmonisation, 129–30 “homestyle” exemption, 84–8 Hong Kong, dispute with Norway, 197–200 ICSID (International Centre for Settlement of Investment Disputes), 98–9 import licenses, Tokyo Round code, 51 India: agricultural concerns, 192–3 dispute with Turkey, 240–9 imports of wool shirts from, 238–40 pharmaceutical patents and, 71–9, 89–90 and US Underwear Imports case, 236 Indonesia: automobile industry subsidies, 106–8 dispute with EU, 106–8 Inland Waterways opinion, 330–1 intellectual property: conventions, 63n and GATT, pre-1995, 64–7 regimes, 67–68 see also TRIPS International Centre for Settlement of Investment Disputes, see ICSID International Fruit case, 358–61 Invisibles Code (OECD), 100–1 Italy, customs duties and European Court of Justice, 357–8 Japan: anti-dumping complaint, 285–7 dispute with Indonesia, 106–8 dispute with US, 269–72 Kennedy Round, 39 Korea: dairy safeguards case, 203–10 DRAMS case, 294–8 Kuilwijk, Kees Jan, 7–9 legitimate expectations, 37, 42, 72, 75–6, 88 limited exceptions, 80–2, 143 Lomé Conventions, 258 MAI (Multilateral Agreement on Investment), 101, 116–18 “mailbox” requirements, 70, 73–4 390 Index MERCOSUR (South American regional trade agreements), 210–11 Mexico, dispute with US, 122–6 MFA (MultiFibre Arrangement), 197–9, 229–31, 342 MFN, see most favoured nation (MFN) concept Milk case, 182–8 most favoured nation (MFN) concept, 28, 32–3, 111 MultiFibre Arrangement, see MFA Multilateral Agreement on Investment, see MAI “music, fairness in” licensing, 84–8 New Commercial Policy Instrument (EU), 334–6, 372 New Zealand: dispute with Canada, 182 dispute with US, 224–8 NICs, see developing countries Norway: dispute with Hong Kong, 197–200 Sardines dispute, 44–5 nullification of benefit, 42–9 OECD (Organisation for Economic Cooperation and Development): investment codes, 99–101 MAI (Multilateral Agreement on Investment), 116–18 oilseed case, 177–9 patents: 69 anticipatory, 70 exceptions to rights conferred, 88–9 performer protections, 69 pharmaceutical patents, 70, 88–90 Brazilian, 88–9 Canadian, 79–82 Indian, 71–9, 89–90 PPA (Protocol of Provision Application), 30–1 precautionary principle, 141 Protocol of Provision Application, see PPA QRs (quantitative restrictions), 34–5, 198–9, 201 recording rentals, 69 risk assessment, 130 Safeguards Agreement, 54, 197, 200–3, 228 causal links, 206, 220–4 developing countries and, 201–2 duration and review, 201–2 notification obligations, 202 QRs and, 201, 209 unilateral actions, 202 see also GATT, safeguard arrangements; Korea, dairy safeguards case; United States, Lamb Meat safeguards; United States, Wheat Gluten safeguards Salmon case, 153–7 Sanitary and Phytosanitary Measures Agreement, see SPS SCM (Subsidies and Countervailing Measures Agreement), 54, 303–4 categories of subsidies, 103–6 Civil Aircraft case, 310–16 DISC case, 304–10 Indonesian subsidies, 106–8 national law as export subsidy, 304–10 serious prejudice claims, 111–13 and TRIPS, 113–14 Sea Turtle case, 141–7, 148–9, 151–3 Seattle uprising, 116 Services Agreement, see GATS (General Agreement on Trade in Services) shrimp products, 151–3 South American regional trade agreements, see MERCOSUR SPS (Sanitary and Phytosanitary Measures Agreement), 121, 128–30, 132, 195 Agriculture Agreement and, 181 Codex Alimentarius Commission, 133–4, 137 disguised restrictions on trade, 150 harmonisation, 129–30 ike products aspect, 162–3 precautionary principle, 141 risk assessment, 130 Salmon case, 153–7 see also Application of Sanitary and Phytosanitary Measures; Asbestos case Subsidies and Countervailing Measures Agreement, see SCM subsidies, export, 34, 181, 182–3 TBT (Technical Barriers to Trade Agreement), 54–55, 121, 130–1 and Asbestos case, 159–62 Tokyo Round code, 50 TEDs (turtle excluder devices), 142, 148 Textiles and Clothing Agreement, see ATC Textiles Monitoring Body, see TMB Thai cigarettes case, 126–8 TMB (Textiles Monitoring Body), 231, 233, 235 Tokyo Round, 39–40 codes, 49–51 Trade Barriers Instrument (EU), 336–7 trade, and the environment, 119–22, 173–4 disguised restrictions on trade, 150 harmonisation, 129–30 precautionary principle, 141 risk assessment, 130 Index 391 Sea Turtle case, 141–7, 148–9, 151–3 Thai cigarettes case, 126–8 Tuna-Dolphin case, 122–6 Uruguay round and, 128–30 see also TBT (Technical Barriers to Trade Agreement) Trade Related Aspects of Intellectual Property Agreement, see TRIPS Trade Related Investment Measures, see TRIMs Trade Related Investment Measures Agreement, see TRIMs Agreement trade rights, as European rights, 7–10 trademarks, 69 TRIMs (Trade Related Investment Measures), 94–5, 96–7, 101–2, 251 TRIMs (Trade Related Investment Measures) Agreement, 54, 93–4, 101–3 and Canadian automotive industry, 114–16 Indonesian subsidies, 106–8 local content requirements and tax and customs duties, 108–9 MFN violations, 111 sales tax discrimination and, 109–10 TRIPs (Trade Related Aspects of Intellectual Property) Agreement, 54, 63–4, 66 biodiversity and genetic engineering, 90–1 business exemptions, 84–6 CCP and, 345, 346 computer programs, 69 copyrights, 68–9 and developed and developing countries, 67–8, 88–92 dispute resolution, 68, 70–1 domestic remedies, 69 emergency use provisions, 89 exclusive marketing rights, 74–5, 78 “fairness in music licensing”, 84–8 film rentals, 69 “homestyle” exemption, 84–8 legitimate expectations, 72, 75–6, 88 limited exceptions provision, 80–2 “mailbox” requirements, 70, 73–4 non-retroactivity, 82–4 normal exploitation, 87 patents, 69 performer protections, 69 pharmaceutical patents, 70, 79–82, 89–90 rationale, 97 recording rentals, 69 and Subsidies (and Countervailing Measures) Agreement, 113–14 trademarks, 69 see also intellectual property Tuna-Dolphin case, 122–6 Turkey: and customs union requirements, 240–9 dispute with India, 240–9 turtle excluder devices, see TEDs UNCTAD (United Nations Conference on Trade and Development), 39 United States: agricultural position, 193–5 anti-dumping legislation, 298–303 dispute with Brazil, 88–9 dispute with Canada, 94–6, 182–9 dispute with Cost Rica, 235–7 dispute with Indonesia, 106–8, 113–14 dispute with Korea, 294–8 dispute with Malaysia, 151–3 dispute with Mexico, 122–6 EU and, 39–40, 131–41, 177–9, 193, 261 foreign sales corporations (FSCs) dispute, 304–5, 308, 310 Lamb Meat safeguard, 224–8 trade agreements and Presidential powers, 27–8, 29 underwear imports, 234–7 Wheat Gluten safeguards, 213–19, 220–4 Uruguay Round: agreements, 6, 53–5 Dispute Settlement Understanding (DSU), 56–8 DSU and DSB, 56–8, 70–1 negotiations, 41–2 trade and the environment and, 128–30 VERs (Voluntary Export Restraints), 41, 54, 197, 202, 324 Waart, P de, 10 Weiler, J H H, 12 Weiss, Friedl, 10 WIPO (World Intellectual Property Organisation), 63n , 68 WTO (World Trade Organisation), 1, 54, 58–9 DSU (Dispute Settlement Understanding), 56–8, 70–1 establishing legitimacy, 10–14 public interest dimension, 4–7 Uruguay Round Agreements, US attitudes to, 2–3 Yaounde Convention, and the European Court of Justice, 361–2